Indian economy to improve in next two quarters: Assocham survey

NEW DELHI: Majority of India Inc feels optimistic about the state of the economy improving in the next two quarters at the industry and firm level, although the last six months have not witnessed much of a change at the ground level, says Assocham's Biz Confidence survey.

"In the coming six months there seems to be growing optimism in terms of the economic performance with 80 per cent respondents feeling that the state of the Indian economy would be better," the June-September round of the survey observed.

The percentages of optimist respondents in the June 2015 round were close to about 54.8 per cent.

As to tentative recovery in last six months, the survey noted that while there were signs of economic recovery underway, the situation is still far from robust.

The underlying economic activity remains weak on account of the sustained decline in exports, rainfall deficiency and weaker-than-expected momentum in the industrial production and investment activity, the survey pointed out.

"However, riding on hopes of some decisive actions expected after the Bihar elections, the industry respondents remain optimistic about improvement in the sentiment, though at the present moment, broad demand and investment activity remains subdued," Assocham Secretary General D S Rawat said.

He added that another reason for the positive outlook stems from the macro-economic stability that will help bring down interest rates further, less volatility in the foreign exchange market and improvement in ease of doing business.

The underlying economic activity remains weak on account of the sustained decline in exports, rainfall deficiency and weaker-than-expected momentum in the industrial production and investment activity.

However, when it comes to the period between June and September this year, majority of the industry (60 per cent) feels that the present economic situation is more or less same vis-à-vis the situation six months back.

Coming to specifics, the firms felt that though sales volume would pick up going forward, a commensurate change may not be visible on the profitability. That means, the power with the producer to improve margins on increasing sales would remain limited.

As many as 68 per cent of the respondents expect that during October to December 2015, their sales volume will further increase, the survey added.

In terms of cost of credit, majority of the respondents (44 per cent) feel that there is no change in the cost of credit during July to September, which is a bit surprising, considering that the RBI has reduced the policy rates.

"The possible explanation to this could be that the benefit of the rate cuts is not being passed onto the industry appropriately. However, the industry feels that there could be a decline in the cost of credit going forward," the survey said.

Moreover, the industry wants quick action on infrastructure development, clearance of projects, stability in prices, effective policy reforms and better coordination between states and the Centre, it added.